Clarification

Clarification

True fact (humor in the financial press):

A very large government contractor (VLGC) is involved in a proxy fight with a questionable outside investor (QOI). The QOI published the following in a large number of big city newspapers (BCNs). It quotes statements from the VLGC's annual statement and the QOI's translation... quote:

[VLGC] says

Our translation

We characterize 1989 as a transitional year which prepared us for strong financial performance in 1990 and beyond.

1989 was a bad year

[VLGC]'s sales increased slightly when adjusted for completion of the <plane> program.

Sales are down $541 million. But they're up if you count business we don't have anymore.

A third initiative centers on our efforts to attract commercial aircraft subcontracting work to our facilities in Georgia. We are continuing discussions with potential customers and expect to build this base significantly.

We still haven't found a replacement business for the <plane 1>.

The write-offs are expected to cover excess costs to completion after estimated pricing adjustments and contract changes.

The write-offs will be even higher unless the government agrees to rewrite the contracts.

Absent the write-off on the <plane 2> aircraft modification program margins also improved for the technology services group.

Profit margins are down. But they are up if you don't count the business we lost money on.

The stock buy-back program to recover from the market share equivalent to those issued to the ESOP was suspended in 1989, pending clarification of the timing of cash requirements related to the 1989 write-offs.

We stopped buying back shares because we were running out of money.

There are hundreds of ongoing programs throughout [VLGC] that form a solid business base. Many of the programs extend well into the future. Ordinarily, because of the method of funding of government programs, they do not appear in the backlog beyond the current year.

Early this year, we agreed with the customer that work on future phases of this program will be performed by another supplier.

We got fired.

Regarding the <plane 3>, several factors have occasioned design and schedule difficulties in developing the aircraft. Significant among these factors was an expectation of a high degree of commonality with the <plane 4> which turned out not to be attainable due to other performance characteristics required by the Navy.